News Update

ACC approves senior level appointmentsPressure mounts on Centre to cut excise duty on Petrol & Diesel prices; Some States may follow suit but not TNPublic Notice No. 33/2018 - Teething troubles faced by importers (See 'TOG INSIGHT' in '')CX - Valuation -S.4 of CEA, 1944 - Price prevailing for sale at depot immediately 'prior' to clearance from factory gate was to be adopted: CESTATThe new AEO SchemeI-T - if assessee fails to produce certain documents, it does not legitimise AOs presumption that transactions were not genuine: HCForeign Players Participating in IPL - Hit by GST?ST - Site Transfer activity involves processing of goods not amounting to manufacture and, therefore, same are taxable under 'BAS' - services partly performed outside India is also export - rebate available: CESTATGovt working on solution to rise in fuel prices, says PradhanGST Council holds joint meeting with CST & SGST officials in Hyderabad; happy with close coordinationOMCs hike diesel price by 26 paisa & Petrol price by 33 paisa per litre from todayGovt aims at reducing dwell time to 24 hours at ICD, say Mumbai Chief CommissionersWTO Members debate over fisheries subsidiesPM dedicates Kishanganga Hydro Project to Nation in SrinagarYeddyurappa Govt resigns before floor test; CM delivers emotional speechDemocracy under lens - SC orders live telecast of floor test in Karnataka Assembly todayI-T - if assessee fails to produce certain documents, it does not legitimise AOs presumption that transactions were not genuine: HCE-way bill required for supplies within Union Territories w.e.f 25.05.2018I-T - Income surrendered during search can be set off against business loss for AY 2013 -14 as amendment in Sec 115BBE is operative only from AY 2017-18: ITATACC clears Jharkhand Cadre IAS Amit Khare as new I&B Secretary + Anup Wadhawan to take over as Commerce Secretary + Dr M M Kutty to be new Petroleum SecretaryData Security & Privacy - Parliamentary Panel invites inputsBRICS Summit - India calls for judicious use of resourcesUS Trade Deficit - Trump flays ChinaI-T - If any industrial undertaking avails benefits under Ss 80-IA & 80-IB, it is still entitiled to avail Sec. 80-IC benefits: SCGSTR-3B - Govt extends deadline till May 22AP Govt looking for deputationists for GST postsGoyal reviews coal supply to power plantsDate for mandatory digital payment through e-MPS is extended to 01.06.2018Testing of Samples at outside laboratories - more entities addedSuspension of inter-state E-Way Bill on or after February 2, 2018 - a myth?GST - Is it worth reviving the 'Exorcised Ghost' of Sugar Cess?
Capital Good Policy Execution can make or mar or #Make In India

JUNE 03, 2016

By TIOL Edit Team

THE National Capital Goods Policy (NCGP), which was approved by the Union Cabinet on 25th May, offers complex mix of challenges and opportunities to both the Governments and the industry.

Capital goods sector comprises more than two dozen segments or industries that produce equipment for a wide range of manufacturing and service industries. The interests of all stakeholders in this vast sphere of economic activities are always varied and often conflicting.

Creating synergies between these sectors and convincing all stakeholders to look at long-term advantage of robust indigenous capital goods industry are herculean task. Here one has to factor in the need for seeking cooperation of States too, whose multiple taxes and flawed tendering for different projects hurt interest of capital goods sector.

NCGP would thus test Modi Government's policy implementation skills. It would examine its capability to build consensus among all stakeholders to provide a favourable ecosystem for growth and expansion of capital goods sector.

As put by the 103-page mega Policy, which is like a committee report, "The smooth implementation and effectiveness of the policy will require alignment and joint action of several ministries and departments and have implications on multiple stakeholders and user industries. To this end, a governance mechanism has been proposed in the form of inter-ministerial and inter-departmental committees at the highest level to ensure due consideration of the interests of all stakeholders. The committees will be tasked with driving coordinated action and monitoring the progress and effectiveness of policy on an annual basis."

This coordination strategy is highly unlikely to deliver desired outcomes. The Government should set up an empowered standing committee of secretaries, to resolve issues that would arise during the policy implementation.

The proposed panel should be delegated powers to address issues of inverted duty structure (IDS) that keep cropping up due to dynamic nature of globalized trade. IDS problem keeps getting accentuated due to signing of free trade agreements (FTAs) and other preferential trade pacts that Department of Commerce is always plugging for. The Government should put a freeze on signing of new FTAs and ensure that existing ones result in balanced trade, if not rise in exports to FTA countries.

NCGP rightly calls for formulation of a long term, stable and rationalized tax and duty structure. It has pitched for uniform Goods and Services Tax (GST) regime across all capital goods sub-sectors with import duty after set-off to ensure level playing field against imports. It also advocates parity of import duty structure with domestic duties, for example, equalize Countervailing Duty (CVD) and Excise duty; and Special Additional Duty (SAD) with Sales tax/ VAT or GST (as applicable).

Tariff Commission has done several in-depth valuable studies on competitiveness of capital goods, which don't find any mention in NCGP. It is thus difficult to know whether the Government has factored in the findings and recommendations of such studies, commissioned by different ministries, while preparing the Policy.

Some studies deserve specific mention to understand why capital goods industry has been on the decline since the reform. The studies include: Import of second hand machinery and their impact on domestic manufacturers of capital goods and their competitiveness; Impact Assessment of FTAs/ PTAs on Capital Goods; Input Cost Study on Sub-Sectors of Capital Goods; Competitiveness of Indian Manufacturers Vs. Chinese Manufacturers in respect of Capital Goods and Impact of Liberalization/Tariff Reduction on HMT and other Public Sector Enterprises.

A missing link in the Policy is the need for facilitation of growth of engineering, procurement and construction (EPC) business at home and abroad. EPC or turnkey companies serve as channels for supply of diverse capital goods to project developers.

The Government must thus strive for imaginative policy stimulus for strong bonding between capital goods, EPC and consultancy businesses.

Projects exports and deemed exports are two other areas that should be monitored and managed well to enhance export of capital goods.

The Government should set time-lines for implementation of numerous recommendations contained in NCGP.

NCGP, if implemented whole-heartedly and methodically, can serve as bulwark for renaissance of manufacturing, which has been clinically weakened under the garb of economic reforms since mid-1991.

The Policy provides for increase production of capital goods from Rs.2,30,000 crore in 2014-15 to Rs.7,50,000 crore in 2025. It calls for and raising direct and indirect employment from the current 8.4 million to 30 million. It also envisages increasing exports from the current 27 percent to 40 percent of production.